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TMI Blog2020 (1) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... t consider it necessary to examine the further question whether the DSGs are violative of any fundamental right under Article 19 (1) (g) of the Constitution and whether the restriction placed on the said right by them are beyond the purview of Article 19 (6) of the Constitution - The Court, therefore, leaves it open to the Appellants/Defendants to challenge the Direct Selling Rules under the CPA, once they are notified, as being violative of Section 30 of the TM Act and Sections 419 and 420 of the Sale of Goods Act, 1930 ( SOGA ), Sections 23 and 27 of the Indian Contract Act, 1872 ( ICA ) and the Competition Act, 2002. There is no occasion for the Court in the present case to further examine these issues - The Court sets aside the findings of the learned Single Judge on the first issue that the DSGs are law and that, as such, they are enforceable. Trademark issues - Whether sale of Amway, Oriflame and Modicare products on e-commerce platforms amounted to infringement of trademark, passing off and misrepresentation, etc.? - HELD THAT:- Under Section 19 of the SOGA, upon a contract for sale for a specific property, the property and the goods are transferred to the buyer. The Code of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n considered by the learned Single Judge. These too are matters in respect of which clearer answers would emerge hopefully at the conclusion of the trial - The Court is, therefore, unable to concur with the view expressed by the learned Single Judge that the Defendants could not invoke the principle of exhaustion in terms of Section 30 (3) read with Section 30 (4) of the TM Act, or that the sale of the Plaintiffs products on e-commerce platforms violates their trademark rights, constitutes misrepresentation and passing off, and results in the dilution and tarnishing of the goodwill and reputation of the Plaintiffs brand. These findings are outside the purview and scope of pleadings in the suits and unsustainable in law. Are the Appellants intermediaries? - HELD THAT:- The exemption under Section 79 (1) of the IT Act from liability applies when the intermediaries fulfil the criteria laid down in either Section 79 (2) (a) or Section 79 (2) (b), and Section 79 (2) (c) of the IT Act. Where the intermediary merely provides access, it has to comply with Section 79 (2) (a), whereas in instances where it provides services in addition to access, it has to comply with Section 79 (2) (b) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion, without actually examining whether the grant of injunction would have an adverse impact on online marketing. What was not considered is whether the requirement of online marketing entities to seek prior consent of the DSEs would not deprive the consumer of exercising the choice to buy such products on online platforms, while ensuring free flow of trade. As regards irreparable loss and injury, there was no empirical data placed before the learned Single Judge by the Plaintiffs in support of their contention that they had suffered huge losses. This again was a matter of evidence and not inference - the Court is unable to concur with the learned Single Judge that the three elements for the purposes of grant of interim injunction have been fulfilled in the present case. The impugned judgment of the learned Single Judge is hereby set aside. The applications seeking interim injunction in the suits stand dismissed - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... t are not to be considered as arising out of "commercial disputes", falling within the purview of the Commercial Courts Act, 2015 ('CCA'). They have accordingly been heard by this Bench, which is otherwise not authorised to hear appeals which are to be heard by the Commercial Appellate Division of this Court in terms of the CCA. Facts in Amazon's appeals 5. Amway is engaged in the manufacture and distribution business of its healthcare, wellness, cosmetic, and home products through a business model called the Direct Selling Business Model ('DSBM'). The products offered for sale by Amway include moisturizers, creams, lipsticks, detergents, surface cleaners, shaving creams, deodorants etc. Amway claims that it has given an undertaking to the Government of India ('GoI') to abide by the DSGs in the conduct of its business. Amway also sells its products on its own online market place, www.amway.in. 6. Amway is a wholly-owned subsidiary of Amway Corporation, now known as Alticor Inc., headquartered at Ada, Michigan, USA. The parent company which was founded in 1959 applied to the Ministry of Industry, GoI in June, 1994 for setting up a wholly owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business Owners". 10. According to Amway, its products bear a "unique code". This is stated to be located on the "upper surface of the cap of the product packaging" which allows Amway "to track the distributor channel, selling the said product to an end customer". The imprinting of these unique codes is stated to ensure prevention of the circulation and sale of any counterfeit Amway products through unauthorized trade channels. According to Amway, the trust of its Direct Sellers and their customers receives the highest attention and it has a "Customer Product Refund Policy", covering all Amway Products, which allows a customer who is not completely satisfied, to return the product within 30 days of the purchase of invoice/delivery. This refund policy is applicable to "products in saleable condition, and partially used products (30%) accompanied with an invoice". According to Amway, it has a nationwide presence with 130 sales offices, 4 regional warehouses, 3 regional hubs and 34 city warehouses catering to over 8900 pin codes across the country. It is the founder member of the Indian Direct Sellers Association ('IDSA') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablets" were being offered for sale on the said website. It is stated that such a sale on Amazon's online platform was unauthorised, since it was without the leave, permission or licence of Amway, which has till date not authorised anyone to sell or advertise its products on Amazon's Online Platform. It was averred in the plaint that this was in direct violation of the Clause 7 (6) of the DSGs, which states: "Any person who sells or offers for sale, including on an e-commerce platform/marketplace, any product or service of a Direct Selling Entity must have prior written consent from the respective Direct Selling Entity in order to undertake or solicit such sale or offer." 15. It was further averred in the plaint that Amway's products were being sold by the Defendants at much cheaper prices than the market price and that this cast "serious doubts" on the authenticity of Amway's products sold by the Defendants. It was claimed that Amway "has been facing huge financial losses on account of the illegal activities of the Defendants." 16. On 22nd September, 2017, Amway sent a cease and desist notice to Amazon, asking it "to rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) Rules, 2011 ('Intermediary Guidelines') which requires due diligence to be undertaken by intermediaries, which Amazon claims to have complied with. 20. In the plaint it is averred that on 21st September, 2018 Amway's representative purchased the Amway products from Amazon's website. 21. Further, a reference was made to the fact that by an order dated 1st June, 2018 in CS (OS) 297/2018 filed by Amway against "some identified and unidentified medical shops/pharmacist in Bhagirath Palace, Delhi", this Court had granted an ad interim injunction and John Doe order against all the Defendants in the said suit. The Court also appointed four Local Commissioners ('LCs') and during raids it was found that Amway products worth lakhs of rupees with or without unique codes had been seized in the shops of such Defendants. Reference is also made to two other Civil Suits being CS (OS) 410/2018 and 453/2018 filed by Amway against two online aggregators/market places, in which an interim injunction restraining those online market places from selling Amway's products, without its prior authorisation, was passed. The LCs appointed in those suits were also aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the order that its counsel had agreed to take down Amway listings from the online platform. It was accordingly directed that Amazon shall within three days, pull down all Amway listings on both the e-commerce platform and the mobile application and confirm the same to Amway through the counsel. It was stated that "the question as to whether the e-commerce platform is liable in such situations and whether the doctrine of exhaustion would apply, would be gone into on the next date of hearing". 26. By the same order, the learned Single Judge disposed of IA No. 13160/2018 by appointing four LCs to visit the premises of Defendant Nos. 1 to 3 and directing them to "make an inventory and take into custody all impugned products, including packaging, labels, stationery, hoardings and other materials bearing the mark "AMWAY". The LCs were authorised to seal the impugned products and return them on superdari after obtaining undertakings of the respective Defendants. 27. The four LCs so appointed, submitted their respective reports to the Court on 6th, 12th, 15th and 16th October, 2018 respectively. Amazon filed an additional affidavit dated 31st May, 2019. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dtail, FAO (OS) 141/2019 & 142/2019 arise from the aforementioned suits filed against Amazon and the sellers on its platform which included Cloudtail, by Amway and Oriflame respectively. It is Cloudtail's case that it too is an "intermediary" in terms of the IT Act and the Intermediary Guidelines. It too raises questions regarding the legal binding effect of the DSGs. 34. The 6th Appeal is by Snapdeal. It arises out of CS (OS) 453/2018 filed by Amway against nine Defendants with the ninth Defendant being Jasper Infotech Private Limited ('Jasper Infotech') which runs the e-commerce website "www.snapdeal.com". It may be noticed here that the name of Jasper Infotech has been changed to Snapdeal on 20th March, 2019. Defendant Nos. 1 to 8 in the suit were sellers on the online platform of Defendant No. 9. Snapdeal too claims that its operations on its online market place was limited to facilitating the buying and selling of various goods and services between independent sellers and independent buyers. In other words, it was acting merely as an intermediary and did not directly engage in the sale or purchase of the products. 35. As far as Snapdeal is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in Section 79 of the Information Technology Act and the Intermediary Guidelines of 2011? iv) Whether e-commerce platforms such as Amazon, Snapdeal, Flipkart, IMG, and Healthkart are guilty of tortious interference with the contractual relationship of the Plaintiffs with their distributors/direct sellers? v) What is the relief to be granted?" 39. The conclusion of the learned Single Judge in the impugned judgment vis-a-vis the above issues can be summarised thus: (i) the Direct Selling Guidelines have been framed in terms of the legal procedure, and are binding in law. They have been issued and notified in terms of the Article 77 of the Constitution of India and it is the only document that regulates the business of Direct Selling; (ii) the present Appellant/Defendants were found guilty of infringing the trademarks of the present Respondents/Plaintiffs, of dilution/tarnishment, passing off, and misrepresentation; (iii) the Defendants were not merely passive players but in fact, "massive facilitators" inasmuch as they were providing warehousing, logistical support, packaging and delivery services; the bare minimum that the Defendants are required to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2011) 15 SCC 398 and the decision dated 23rd April, 2019 of the Bombay High Court in Commercial Suit IP No. 114/2018 (Tips Industries v. Wynk Music Limited) in their applicability to the case at hand. 43. On the second question of whether the sale of the Plaintiffs' products by the Defendants violated the Plaintiffs' trademark rights, the learned Single Judge opened the discussion by observing in para 175 of the impugned judgment that the Plaintiffs in each of the suits i.e. Amway, Modicare and Oriflame "are the owners of their respective trademarks." The Defendants were found guilty of infringing the above trademarks and diluting it and passing off as their own misrepresenting their association with Amway, Oriflame and Modicare. It was concluded that the principles of exhaustion in terms of Section 30 of the Trade Marks Act, 1999 ('TM Act') did not exempt the Defendants from liability thereunder and the manner of sale on the e-commerce platforms also constituted passing off, misrepresentation and dilution/tarnishment of the products and business of the Plaintiffs. 44. It was held by learned Single Judge that the condition imposed by the Plaintiffs on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed their inapplicability. These included the decision dated 23rd May, 2017 in Case No. 2016-1290 (Milo & Gabby v. Amazon.com Inc.), Tre Milano, LLC v. Amazon.com, the decision dated 24th July, 2018 in Civil Action No. 17-2738 (FLW) (LHG) (Allstate New Jersey Insurance Company v. Amazon.com), Matrix Essential v. Emporium Drug Mart 756 F. Supp. 280 (W.D. La. 1991), Matrix Essentials v. Emporium Drug Mart 988 F. 2d 587 (5th Cir., 1993), Sebastian Intern v. Long Drug Stores 53 F. 3d 1073 (9th Cir., 1995) and the decision of the Canadian Supreme Court in Consumers Distributing Company Limited v. Seiko Time Canada Limited (1984) 1 S.C.R. 583. 49. The learned Single Judge also relied on the decision dated 3rd July, 2019 of the US Court of Appeals in Case No. 18-1041 (Heather R. Oberdorf v. Amazon.com Inc), the decision of the European Court of Justice decided on 23rd April, 2009 in C-59/08 (Copad SA v. Christian Dior Couture SA), the decision dated 18th December, 2018 of the Court in Milan in G.R. No. 44211/2018 (Landoll S.R.L. v. MECS S.R.L.) and the decision dated 19th November, 2018 in G.R. No. 38739/2018 (L'Oreal Italia SPA v. IDS International Drugstore Italia SPA). 50. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Single Judge that: "On a totality of the facts, it is held that use of the mark by the sellers and by the platforms is violative of the Plaintiffs' trademark rights and the Defendants' are not entitled to the defence under Section 30. The manner of sale on the e-commerce platforms also constitutes passing off, misrepresentation and dilution/tarnishment of the Plaintiffs' marks, products and businesses." 53. Turning to Issue (iii), the learned Single Judge concluded that the e-commerce platforms were not merely passive players but "in fact are massive facilitators" inasmuch as they were providing warehousing, logistical support, packaging, delivery services, payment services, collection gateways etc. Reference was made to the FDI Press Note No. 2 of 2018 issued by the GoI in respect of FDI in e-commerce, and its para 5.2.15.2.2 which defines e-commerce. 54. Reference was also made by learned Single Judge to the decisions in Christian Louboutin SAS v. Nakul Bajaj 2018 (76) PTC 508 (Del) and judgment of the Supreme Court of India in Shreya Singhal v. Union of India (2015) 5 SCC 1, while distinguishing the decision of the Division Bench in My ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of the sellers, they offer a comfortable refuge for parties breaching their contracts with the Plaintiffs. This refuge by itself constitutes inducement." 57. It was concluded by learned Single Judge that "the continued sale of the Plaintiffs' products on the e-commerce platforms, without the consent of the Plaintiffs, results in inducement of breach of contract, and tortious interference with contractual relationships of the Plaintiffs with their distributors." 58. In arriving at the above conclusions, the learned Single Judge referred extensively to an Article by John Danforth titled "Tortious Interference with Contract: A Reassertion of Society's Interest in Commercial Stability and Contractual Integrity" Columbia Law Rev. Vol. 81 No. 7, 1491 and the Commentary titled "Salmond & Heuston on the Law of Torts", R.F. V. Heuston and R.A. Buckley, 20th Edition Universal Book Traders at page 358, as well as the decisions in Aasia Industrial Technologies Limited v. Ambience Space Sellers Limited (1998) 18 PTC 316 (DB) and the judgment of the learned Single Judge of the Calcutta High Court in Balailal Mukherjee and Company Private Limited v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 62. It was further observed by learned Single Judge that: "The argument of exhaustion completely fails as there is large-scale impairment of the goods as also misrepresentations being made on the platforms. Conditions of the goods being sold on the e-commerce platforms has been changed. The MRPs are shown to be higher in some cases. Wrong attribution of product names is also happening on some of the platforms. The source of the products listed on the platforms are suspect. The listings are also misleading as they use the Plaintiffs' product images, marks, logos, names, etc. giving an impression that the products are sold by the Plaintiffs themselves. The consumer is not being told that the seller is not authorised by the Plaintiffs, to sell the said products. A consumer would, literally, require investigative capabilities to trace the actual seller." 63. On whether the DSGs are considered binding law, and on how the Plaintiffs' right to carry on business was being affected by the actions of the Defendants, it was further reiterated by the learned Single Judge that: "324. The Direct Selling Guidelines are law. While the Defendants' platforms and se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring for the Cloudtail, Mr. Saikrishna Rajgopal, learned counsel appearing for Amazon; Mr. Rajshekar Rao learned counsel appearing for Snapdeal; Mr. Parag Tripathi, learned Senior Counsel and Ms. Priya Kumar, learned counsel appearing for Amway; Mr. Balbir Singh, learned Senior Counsel appearing for the Oriflame and Mr. Jayant Bhushan, learned Senior Counsel appearing for Modicare. Prefatory observations 67.1. The Court would like to preface the discussion on the issues with brief observations on the nature of the suits themselves. From the plaints and the suits filed, four to be precise, it is plain that none of them was filed as a commercial suit, since none of them was framed as a suit either for passing off or for infringement in terms of the TM Act. 67.2. The second factor to be kept in mind is that in none of the suits was there any prayer for a declaration that the DSGs are law that bind the Defendants and that, as such, they are enforceable. Thirdly, there was again no prayer for a declaration that Amazon and Snapdeal were not "intermediaries" within the meaning of Section 79 of the IT Act. These factors attain significance in light of the fact that the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring the learned ASG to address arguments on behalf of the Union of India at an interlocutory stage, without it being party to the suits themselves, was, therefore, untenable. 67.7. It would be a different matter if the plaints themselves supported the case that the DSGs are indeed law and an officer of the Union of India was summoned as a witness in the trial. The Court on its own requiring the Union of India to address it on this aspect, in a civil suit, is indeed a deviation from the CPC itself, which would strictly govern the adjudication of civil suits filed on the original side of this Court. That this Court has original jurisdiction does not mean under that jurisdiction the Court will assume to itself the powers of a Writ Court. The flexibility of procedure that may be available to the Court while dealing with a writ petition under Article 226 of the Constitution, is not, and ought to not be adopted while dealing with civil suits filed on the original side, which would be strictly governed by the provisions of the CPC read with the corresponding provisions of the Delhi High Court Act and the Original Side Rules of the Delhi High Court. 67.8. In such circumstances, the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts guaranteed by Articles 19 (1) (g) of the Constitution. 72. The learned Single Judge appears to have committed an error in rephrasing the "the first and foremost question", as "whether any right under Article 19 (1) (g) of the Constitution is impinged by the issuance of these guidelines". What was required to be addressed first was the issue whether the DSGs were indeed Taw' and were the suits seeking enforcement of such law be maintainable? 73. At this stage, it is important to examine the DSGs. A perusal of the notification dated 26th October, 2016 issued by the Department of Consumer Affairs reveals that an Inter-Ministerial Committee ('IMC') was constituted by the Government of India with representatives of the Ministry of Finance, Department of Industrial Policy and Promotion, the Department of Legal Affairs, the Department of Information and Technology and the Ministry of Corporate Affairs. Besides these five ministries and departments, the representatives of the Government of NCT of Delhi, the States of Andhra Pradesh and Kerala were also part of the said IMC. They were to look into "the matters concerning the direct selling industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Consumer Protection Act, 2019-Comments from the stakeholders on draft rules-Reg". This has come as a result of the CPA, 2019, which was published in the official gazette on 9th August, 2019. The CPA, 2019, itself is yet to become operational, as it is awaiting the formulation of Rules thereunder. 78. This communication dated 11th November, 2019 notes that Rules under various topics are required to be notified under the new Act. Eight such topics have been notified and in Sl. No. 6 are the "Consumer Protection (Direct Selling) Rules, 2019". Stakeholders were invited to offer their views and suggestions on the draft Rules till 2nd December, 2019. A comparison of the text of draft Consumer Protection (Direct Selling) Rules, 2019 with the DSGs shows that the former almost entirely replicates the latter. Rule 8 (6) of the draft Rules, for instance, is a verbatim reproduction of Clause 7 (6) of the DSGs. Interestingly, even the definition of the "Act" under Rule 2 (1) (a) is identical to Clause 1 (1) of the Model Direct Selling Guidelines, 2016 and is defined to mean "CPA", with only the year being different; in the DSGs it is CPA, 1986, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uot;, cannot be questioned. The facts that the Supreme Court was confronted with in that case were that publishers of the text books raised a challenge to certain executive instructions issued by the State Government. The State Government took upon itself the task of publishing and printing text books published by different publishers by giving a mere 5% royalty to the publishers. The action of the State Government was not, however, traceable to any statute as such. 84. In the present case, it is not the government, but private entities like Amway, Oriflame and Modicare, which are trying to seek enforcement of the DSGs. In fact, they are seeking to enforce guidelines against third parties and not against those who might be bound by the DSGs, as and when it becomes law. Merely because the DSGs are notified in the Gazette, they do not attain the status of "law" within the meaning of Article 13 of the Constitution. The source of the power to frame such guidelines is traceable only to the CPA. With the CPA, 2019 itself not having been notified, these draft guidelines could not have attained the character of "binding Rules" under the CPA, 2019, or for that matter, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It was held by this Court that the action of the Government did not amount to infraction of the guarantee under Art. 19(1)(g) of the Constitution, since no fundamental rights of the petitioners were violated by the notifications and the acts of the executive Government done in furtherance of their policy of nationalisation of text-books for students. It is true that the dispute arose before the Constitution (seventh Amendment) Act, 1956, amending, inter alia, Art. 298, was enacted, and there was no legislation authorising the State Government to enter the field of business of printing, publishing and selling text-books. It was contended in support of the petition in Rai Sahib Ram Jawaya's case that without legislative authority the Government of the State could not enter the business of printing, publishing and selling text-books. The Court held that by the action of the Government no rights of the petitioners were infringed, since a mere chance or prospect of having particular customers cannot be said to a be right to property or to any interest or undertaking. It is clear that the State of Punjab had done no act which infringed a right of any citizen: the State had merely. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrariness or discrimination or is so fundamental as to undermine a basic public purpose which the guidelines and the statute under which they are issued are intended to achieve." 88. In G.J. Fernandez v. State of Mysore AIR 1967 SC 1753 the Supreme Court held that the rules in the Mysore Public Works Department Code did not partake the character of 'law' and that Article 162 could not be invoked to recognize the power of the State Government to frame rules. The provision only indicated "the scope of executive power of the State". It was further explained as under: "Of course, under such executive power, the State can give administrative instructions to its servants how to act in certain circumstances; but that will not make such instructions statutory rules which-are justiciable in certain circumstances. In order that such executive instructions have the force of statutory rules it must be shown that they have been issued either under the authority conferred on the State Government by some statute or under some provision of the Constitution providing therefore. It is not in dispute that there is no statute which confers any authority on the State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the public, to seek a direction in a court of law, for compliance with such guidelines. An order validly made in accordance with a statute (as in this case, the Public Premises Act), cannot be interfered with, even if there has been any transgression of any guidelines, except where it is arbitrary or malafide or in violation of any statutory provision. These are well settled principles (See: Union of India v. S.L. Abbas: 1993 (4) SCC 357, Chief Commercial Manager, South Central Railway, Secunderabad v. G. Ratnam: 2007 (8) SCC 212, and State of U.P. v. Gobardhan Lal) 7. As the guidelines relied upon in this case were not issued in exercise of any statutory power under the Public Premises Act or any other statute, even if there was violation or non-compliance with the aforesaid guidelines by the Appellant, relief to the Appellant could not be denied by relying upon the guidelines. To do so would amount to reading the guidelines into the statute, which is impermissible? The only 'remedy' of any person complaining of noncompliance with such guidelines, is to bring such violation, to the notice of a higher authority. We therefore hold that the enforcement of any right or exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter, passing off. Even as this has been acknowledged in the impugned judgment, the learned Single Judge proceeds to examine whether there has been an infringement of the trademarks. This is entirely outside the purview of the pleadings in the suits and such a venture in this regard ought not to have been undertaken by the learned Single Judge. 97. In any event, according to the Appellants/Defendants, the Plaintiffs were not the proprietors of the trademarks 'Amway' and 'Oriflame' respectively. Amway has been registered in the name of Amway Corporation and Alticor Inc., and Oriflame in the name of Oriflame Cosmetics AG, neither of which entities are parties to the suits. The case of the Appellants/Defendants is that once the goods have been lawfully acquired by a person by sale of the goods in the market, the further sale of such goods in the market by that person would not amount to infringement of the proprietor's trademark. The contention is that Section 30 of the TM Act limits the monopoly rights of the trademark owner and confers a benefit on traders to trade lawfully and acquire goods. Conscious of this position, according to the Appellants/Defendants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods, by enforcing contractual stipulations against third parties, the judgment of the learned Single Judge recognizes a monopoly that can be exercised in perpetuity. There is also force in the contention that this runs contrary to the legal position explained in Kapil Wadhwa v. Samsung Electronics (supra). At this stage, the Court would like to discuss at some length the said decision, as it has a direct bearing on the case at hand. The decision in Kapil Wadhwa 102.1. The facts in Kapil Wadhwa (supra) are that Samsung Electronics Company Limited ('SECL') and Samsung India Electronics Private Limited ('SIEPL') were companies incorporated in Korea and India respectively. SIEPL was the subsidiary of SECL. They were part of the Samsung group of companies, which had 14 listed companies and 285 worldwide operations. They were in the business of manufacturing and trading electronic goods, including colour televisions, home appliances, washing machines, air conditioners, computers, printers and cartridges, etc. The business was done under the brand/corporate name, using the trademark 'Samsung'. 102.2. In India, SECL had licensed the use of its trademark ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto market and further sold, there would be no infringement of the trademark irrespective of the fact that whether such a market is an international market or a domestic market. 102.7. The Division Bench disagreed with the conclusion reached by the learned Single Judge, in the context of Section 29 (6) of the TM Act, that if a trademark is registered in one country, then the goods bearing the said registered trademark, can be lawfully acquired in that country alone. It, therefore, further disagreed with the conclusion in para 68 (d) of the judgment of the learned Single Judge that Section 30 of the TM Act implied that the goods lawfully acquired must originate from "the domestic market". 102.8. The Division Bench then concluded as under: "42. There is a patent fallacy in paragraph 68(c). There is no law which stipulates that goods sold under a trade mark can be lawfully acquired only in the country where the trade mark is registered. In fact, the legal position is to the contrary. Lawful acquisition of goods would mean the lawful acquisition thereof as per the laws of that country pertaining to sale and purchase of goods. Trade Mark Law is not to regulate the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in advertising and promotional efforts as held in the decisions reported as 70 F. Supp 2d 1057 Pepsi Co Inc v Reyes; 589 F. Supp. 1163 (1984) Osawa & Co. v. B&H Photo. (iii) Differences in packaging as held in the decision reported as 753 F. Supp. 1240 (1991) Ferrero USA v. Ozak Trading. (iv) Differences in quality control, pricing and presentation as held in the decision reported as 982 F. 2d 633 (1992) Societe Des Produits Nestle v. Casa Helvetia. (v) Differences in language of the literature provided with the product as held in the decisions reported as 423 F. 3d 1037(2005) SKF USA v International Trade Commission &Ors.; 70F. Supp 2d 1057 PepsiCo Inc v Reyes; 816 F. 2d 68, 76(2nd Cir. 1987) Original Appalachian Artworks Inc. v. Granada Electronics Inc. 69. Now, as we see it, this can only happen in case where goods have to be imported from a country of manufacture or a country where they are put on the market thereof, and then imported into India. Only then would there be a difference in the language of the literature provided with the product; difference in services and warranties in the country from where the goods are imported by the seller and the country of import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respondents, the learned Single Judge has correctly injuncted the appellants from so doing, which injunction we affirm. The argument by the appellants that how else would the appellants know about the working of the particular product hardly impresses us for the reason the appellants can design their website in a manner where they are able, on their own strength, without any meta-tagging, to display the relevant information." 102.12. The above passages in Kapil Wadhwa v Samsung Electronics (supra) are a complete answer to many of the contentions raised by Amway, Modicare and Oriflame in the present case. In the considered view of this Court, the learned Single Judge was in error in distinguishing the decision in Kapil Wadhwa v Samsung Electronics (supra) by holding that the principle of exhaustion cannot be invoked by the Appellants/Defendants. Reports of the LC 103. At this stage, it is necessary to notice that the learned Single Judge has based the conclusions about the tampering of goods of the Plaintiffs essentially on the four reports of the LCs. The first LC report dated 6th October, 2018 has been submitted by Mr. Aditya Vaibhav Singh, who visited the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which opened those sealed packages. Only two products are referred to by the LC, one of which did not have the bar code. Who removed these bar codes is still in question. If the seller who sold the product to Amazon had itself removed it, clearly then Amazon could not be blamed for tampering with the bar code. 107. From this one example, it is difficult to understand how the learned Single Judge could have concluded that Amazon was tampering with the products of Amway. This was too sweeping a conclusion to arrive at. It could not form the basis for the denial of the principle of exhaustion by invoking Section 30 (4) of the TM Act. As to whether the goods were in fact tampered with, since the report of the LC does not appear to indicate that he saw such tampering take place in his presence by Amazon, the question could only be settled by examining evidence. 108. In fact, in the written submissions on behalf of Amway, it is conceded that these constitute matters awaiting trial. If that is the position, then it was not open to the learned Single Judge to conclude, and that too at the interlocutory stage, that there was tampering of the products by Amazon. The second LC's repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appreciate Snapdeal's submissions that unlike Amazon, it does not even engage in large-scale 'fulfilment' of orders, and consequently has very few storage and transportation facilities and barely comes into contact with the products sold on its platform. These submissions are at least prima facie supported by the LC's Report dated 27th September, 2019 in FAO (OS) 157/2019, to which the learned Single Judge has made no reference at all. No LC was appointed in Oriflame's suit. The facts revealed in the LCs reports were insufficient to make any specific conclusions regarding the impairment of the products vis-à-vis each of the present Appellants. 113. The learned Single Judge also appears to have accepted the plea of the Plaintiffs that the Defendants engage in the inflation of the maximum retail price ('MRP') of their products to offer 'fake discounts' to consumers. Amazon's case is that it has a strict policy of removing listings without further questions if a complaint is received claiming that the MRP of a particular product has been 'inflated'. In any event, according to Amazon, the MRP displayed on the listings are " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as extensively examined the incidental services provided by these platforms in the form of packaging and entering into fresh warranties. This aspect has already been discussed at length in the decision in Kapil Wadhwa v. Samsung Electronics Co. Ltd. (supra) wherein it was held that the mere fact that there could be a change in the condition of the warranty of a certain product would not attract Section 30 (4) of the TM Act, and equally would not deprive the intermediaries from the option of invoking Section 79 of the IT Act in their defence. 118. The learned Single Judge appears to have misinterpreted Section 79 of the IT Act in concluding that is restricted to 'passive' intermediaries. Section 79 of the IT Act reads as under: "79. Exemption from liability of intermediary in certain cases: (1) Notwithstanding anything contained in any law for the time being in force but subject to the provisions of sub-sections (2) and (3), an intermediary shall not be liable for any third-party information, data, or communication link made available or hosted by him. (2) The provisions of sub-section (1) shall apply if-- (a) the function of the intermediary is limited to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, they have to show that they (i) do not initiate the transmission (ii) do not select the receiver of the transmission and (iii) do not select or modify the information contained in the transmission. The case of these Defendants is as follows. Where there is a potential customer who is accessing the site, so long as it is he who clicks the button, it is the customer who is initiating the transmission. Amazon, Snapdeal or Cloudtail do not 'select' the receiver of the transmission, which is the buyer. They do not modify the information contained in the transmission, such as the choice of the product, the number of units, and so forth. For example, if a potential buyer goes to Amazon's website and selects a book sold by a seller whose name is indicated on the site, as long as this entire transaction is not controlled by Amazon and the choices, of which the transaction consists, are made solely by the customer, such as, say, the decision to purchase three copies of the book, and these choices are not altered by Amazon, the requirements of Section 79 (2) (b) of the IT Act would stand fulfilled. 122. Given the disputed questions of fact that emerge from the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not arise at all. Clearly, the Respondents seem to be unsure as to what their stand ought to be. As a result, the burden of proof has shifted unfairly onto the Defendants to show that they have complied with the requirements of Section 79 of the IT Act, when in fact the Plaintiffs have to first show that there had been a violation of any of their rights due to the Defendants' activities before the "affirmative defence" of Section 79 could be sought to be invoked. Therefore, Section 79 of the IT Act has been, contrary to the judgment in Myspace Inc. v. Super Cassettes Industries Ltd. (supra), sought to be enforced by the Plaintiffs positively, rather than be deployed as "affirmative defence." 125. There is prima facie merit in the contention of the Appellants that the value-added services provided by them as online market places, as listed out by the learned Single Judge, do not dilute the safe harbour granted to them under Section 79 of the IT Act. Section 2 (1) (w) of the IT Act does envisage that such intermediaries could provide value-added services to third party sellers. This interpretation is sought to be buttressed by Press Note No. 2 issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to remove content under Section 79 (3) (b) of the IT Act arises only if there is a Court order or a notification from a government agency on the grounds mentioned under Article 19 (2) of the Constitution. Amazon points out that it did not receive any such Court order from Amway in support of its allegations. The letter of the FSSAI dated 9th April, 2018 was not a notification by an appropriate government agency and did not conform to the grounds enumerated in Article 19 (2) of the Constitution. 129. Therefore, on the third issue also, this Court is unable to concur with the learned Single Judge that Amazon, Snapdeal and Cloudtail would have to meet the diligence requirement, failing which the benefit of the safe harbour provision i.e. Section 79 of the IT Act would not be available to them. Tortious interference 130. The Court turns now to the last issue, viz., whether the platforms are guilty of tortious interference with a contractual relationship. This incidentally is the central plank of Modicare's case. 131. In the first place, the tort of inducement to breach of contract necessitates that there be a contract in the first place between the online platforms and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have committed the breach of the DSGs were not impleaded as Defendants. 135. Even on the test of balance of convenience, the learned Single Judge has only returned such a conclusion, without actually examining whether the grant of injunction would have an adverse impact on online marketing. What was not considered is whether the requirement of online marketing entities to seek prior consent of the DSEs would not deprive the consumer of exercising the choice to buy such products on online platforms, while ensuring free flow of trade. 136. As regards irreparable loss and injury, there was no empirical data placed before the learned Single Judge by the Plaintiffs in support of their contention that they had suffered huge losses. This again was a matter of evidence and not inference. 137. Consequently, the Court is unable to concur with the learned Single Judge that the three elements for the purposes of grant of interim injunction have been fulfilled in the present case. Conclusion 138. For all of the aforementioned reasons, the impugned judgment of the learned Single Judge is hereby set aside. The applications seeking interim injunction in the suits stand dismissed. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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